Wednesday, March 06, 2013

Gov. Pat Quinn laid out some concepts for changes to the state's underfunded pension systems in a budget that he says is the “most difficult” he has presented to lawmakers. However, the House has already decided that when a final budget is enacted, it will contain less spending than Quinn’s plan.

“This is the most difficult budget that I have ever submitted to you,” Quinn said in his budget address today. “But this is also an honest budget that reflects our fiscal challenges, pays down the backlog of bills and addresses funds that have been under-appropriated for too long, There are no gimmicks or fake numbers in this budget,” He said the difficulty was a product of the legislature’s “inaction on pension reform.”

Pension Changes
Quinn took a stern tone when calling on lawmakers to pass a pension proposal that would change benefits for state workers, teachers outside of Chicago and university and community college employees. “Today, our budget is being squeezed more than ever, and that will continue until we put a stop to it. The most important thing we can do to repair Illinois finances right now is to reform our public pension systems,” Quinn said. “ We all know that we must reform the Illinois public pension systems. So, members of the General Assembly, what are you waiting for?”

Quinn said he was willing to work with lawmakers, but he emphasized that there is only so much he can do. “I stand ready to sign comprehensive pension reform immediately. Today. But I cannot sign what I do not have on my desk. The people of Illinois need your immediate action.”

“I thought he was pretty firm in his tone,” said House Minority Leader Tom Cross. He likened Quinn’s address to a parent giving a lecture. “His tone was fairly strong, and I think he focused on where he need to on the need to reform the pensions system. It is the issue of the day. ... I think he was right in making that the focus of his speech. I agree with him.”
Senate Minority Leader Christine Radogno said that she “agreed with the governor” that it is “time to vote” on changes to the pension system. However, she said it was unfair of Quinn to lay the blame on lawmakers. “Most of the work that has been done on pensions has come out of the General Assembly, and not out of the governor’s office,” she said.

Union leaders said that creating an impression that the only choices out there are deep education cuts or reductions to retiree benefits is dishonest. “It is unfair for Gov. Quinn to present this false choice between pensions or pencils. Springfield lawmakers created the massive pension debt by skipping payments and borrowing more. To call that debt an education expense is not only a gimmick, but an insult to teachers everywhere. We are not to blame, and our students shouldn't suffer,” Illinois Federation of Teachers President Dan Montgomery said in a prepared statement.

Quinn laid out some concepts that he said should be part of a pension reform plan. He said he wants a funding guarantee that would require the state to make the annual contribution to the pension systems. He also wants money that is currently being used to pay off pension bonds, which were issued to make past payments, to go toward the unfunded liability once the bonds have been paid off. Such a move would direct almost $1 billion annually to the liability once the bonds expire in 2020. He said the plan should include an increased pension contribution from employees, but he did not give a specific figure on the increase. He also called for a freeze on cost of living adjustments for “those with higher pensions.” He called the current 3 percent compounded COLAs “unsustainable for taxpayers.”

Quinn also said lawmakers should “consider additional solutions to break the gridlock.” He said he would support a gaming bill with “tough ethical standards” and a ban on campaign contributions from casino operators. He has vetoed two gaming bills that he said did not have strong enough protections against corruption. Quinn has demanded for some time now that any money from gambling expansion be spent on education, but for the first time, today he brought up the idea of using gaming revenues on pension costs. “Any enhancement that we enact to gaming revenues this year should be dedicated to education, which could include teachers' pensions.”

Senate President John Cullerton said he plans to push members of his chamber to present pension reform proposals. “This reality reinforces why pension reform remains my top priority this session. For that reason. I have notified all pension reform Senate sponsors to present their bills before the Senate Executive Committee within a week,” Cullerton said in a prepared statement. “I am also working to identify new revenue sources for education and priority programs. I believe that a gaming plan that is structured to address the ethical and regulatory concerns of Governor Quinn can be part of a new revenue mix. I look forward to working with each caucus to advance more solutions for our funding shortfall.”
A Senate committee approved a gaming bill after Quinn’s speech. According estimates from Senate Democrats, the proposal could bring in $200 million to $400 million in revenue for schools, more than $50 million each year for pension costs and almost $32 million in upfront licensing fees that could be spent on overdue bills. The plan calls for a ban on campaign contributions from gaming licensees. The proposal is also a massive expansion that would create five new casinos, allow slot machines at horse racing tracks and airports and create an online gambling system under the Illinois Lottery. Under the so-called i-gaming proposal, residents could bet online. In the past, Quinn has recoiled at large expansions. A spokesperson said that he is “reviewing” the proposal.

Northbrook Democratic Rep. Elaine Nekrtiz, who has been spearheading the pension issue in her chamber, said: “There’s a lot of finger pointing and blame game going on in this whole discussion, and we just need to stop all that and just get about the business of solving it.” She said she thinks that has happened in the House, where she and Cross have presented legislation. She noted that the changes Quinn said he would like to see in the pensions systems are in that plan. “Those are the pieces that are in the Cross-Nekritz bill. By no means are they in every proposal out there. I was very pleased to see that.”

Cuts
Quinn is proposing a $400 million cut to education, which includes K-12 and higher education. Under the proposal, K-12 spending would be cut by more than $275 million. The bulk of the reduction would fall on general state aid to schools, which would be reduced by $150 million. General aid was cut by $161 million under the current state budget. Higher education would take an $83 million hit. In his speech, Quinn did not focus on the details of what the reductions would mean for schools.

Children’s advocates were disappointed with the proposal. “Gov. Quinn’s budget proposal demonstrates that Illinois’ fiscal crisis is far from over and that children, families and communities continue to pay the price for a history of unwise fiscal decisions made by our elected officials. Nearly every area of the budget that impacts children has been subject to deep cuts over the past few years,” Gaylord Gieseke, president of Voices for Illinois Children, said in a prepared statement.

Quinn's plan would not cut early childhood education or Monetary Assistance Program (MAP) grants for low-income college students.

But the cuts may be even deeper in the plan that is ultimately approved by lawmakers because Quinn and the House started their budget planning from two different points. The governor’s budget office estimated the state would have $35.6 billion to spend, but the House yesterday approved a resolution intended to cap spending at $35.08 billion. Quinn’s plan also calls for lawmakers to reassess automatic transfers out of the General Revenue Fund
“Our revenue estimates are based on real numbers. ... They’re based on facts. They’re based on evidence. They’re cautious numbers. They take a pragmatic and reasonable approach, and I don’t know where the governor’s numbers come from,” said Marion Democratic Rep. John Bradley, who chairs the committee that produced the House’s estimate.

Quinn’s budget staff said he plans to call on lawmakers to scrutinize money that is automatically transferred out of the General Revenue Fund before the budgeting battle begins. The largest transfer distributes income-tax revenues to local governments. Other transfers are spent on mass transit or are the result of budget deals made in past years.
“We haven’t even considered that,” Bradley said. “When you talk about the transfers out, what you’re really talking about is the local government distributive fund. Fifty percent of the transfers out go to local governments, and the other [large] percentage of that goes to mass transit, both upstate and downstate. So that’s going to be a fight between him and the city of Chicago, and Cook County and all the local municipalities throughout the state.”

The idea has been floated in the past by Senate Democrats, and some support it again this year. “Nobody wants to see a $400 million reduction in education. ... We can’t let that happen,” said Park Ridge Democratic Sen. Dan Kotowski, who chairs a Senate budgeting committee. “People come to our state for a number of reasons, not just because we have good roads, because we have great schools. No business in their right mind will want to come to the state of Illinois if we don’t fund education at the level it should be funded. If we were to tell people out there in the general public that there’s $1 billion that’s out there that’s automatically spent, and it's not reviewed, and it doesn’t face the same kind of scrutiny as education, health care, human services and public safety, people would say, ‘That’s crazy.’ Well it is. And it needs to be fixed. It’s wrong. It’s broken.”

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